To fund water solutions, why not the obvious? Tax pollutants

Why not the obvious solution? Tax the chemicals that pollute Iowa waters.

Note: A version of this piece ran as a guest opinion in the Sunday, March 6, 2016, Cedar Rapids Gazette.

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One answer to the issue of funding water-quality solutions is right in front of us: Tax the pollutants.

The pollutants are Nitrogen (N) and Phosphorus (P). This is well established by the Iowa Nutrient Reduction Strategy (NRS) that Governor Terry Branstad and the farm industry support. The NRS blames N and P for the pollution that harms Iowa waters and causes the hypoxic or dead zone at the bottom of the Mississippi River.

More than 90 percent of N and two-thirds of the P come from non-point sources, almost all agriculture, according to Iowa State University.

And there is a lot of it. The U.S. Department of Agriculture’s latest Census of Agriculture, for 2012, shows about $2.6 billion was spent on “commercial fertilizer, lime and soil conditioners” in that year in Iowa.

Yet, while debate proceeds on how to deal with the pollution caused by those chemicals, it is worth noting that normal Iowa sales tax does not apply to the N or P used in agriculture.

I stopped by my local hardware store to ask if I, a non-farmer, would pay tax on the standard Scotts 10-10-10 garden fertilizer they sell. I would. But farmers do not pay sales tax for theirs. (There is a small fee on chemicals, including N and P for groundwater protection programs, but no general sales tax.)

Since the debate about how to pay for cleaning our waters is in full swing it is time to propose the obvious. Since N and P are the culprits, let’s tax them at the same rate as, say, pickup trucks.

Farmers pay a 5 percent tax on the pickups they use on the farm and off, to pay for their impact on the roads we all use. Since their fertilizer is used on the farm but also flows into the rivers and streams and lakes we all use, costing us all, a similar tax on fertilizer makes sense.

A 5 percent tax on the $2.6 billion in annual farm fertilizer sales in Iowa would bring in roughly $129 million a year, close to the numbers being thrown about to address water quality in the state. It is roughly comparable to what would come from three-eighths of a cent on the general sales tax for the Natural Resource and Outdoor Recreation Trust Fund that Iowa taxpayers approved — but which legislators have refused to fund. Over the next 30 years the fertilizer fee would bring in something close to what the Governor wants to take from a tax designed for school infrastructure.

Why not the obvious solution? Tax the chemicals that pollute Iowa waters.

IPP-osterberg-75Posted by David Osterberg

David Osterberg co-founded the Iowa Policy Project in 2001 and was director of the organization for 12 years. He continues to lead IPP research on environmental and energy policy for IPP and is a professor in the Department of Occupational and Environmental Health at the University of Iowa. He served six terms as a member of the Iowa House of Representatives, and served as chair of the House Agriculture Committee. Contact: dosterberg@iowapolicyproject.org.

Remembering Dave Hurd

David Hurd believed that people and the environment deserved protection. In all his charitable work, he sought to make this state better.

Dave Hurd supported many Iowa organizations. He had an essential role in our creation of the Iowa Policy Project. In 2001 Joyce Foundation offered our new policy organization a large grant but my grant officer said she wanted to see diverse in-state support. Dave wrote a letter on our behalf to several of his friends who he thought would endorse the work we were beginning at IPP. The amount raised from him and others who responded to that letter gave us the match we needed.

Dave continued to donate to IPP as did many of those who responded to that first fundraising letter. He liked especially our work on water quality but supported our reports documenting the needs of low-income Iowans and our data on fair taxes. He believed that people and the environment deserved protection. In all his charitable work he sought to make this state better. We will miss this great man.

IPP-osterberg-75Posted by David Osterberg, co-founder of the Iowa Policy Project

Reading, ’Rithmetic & Politics

Of course it’s a diversion. May future debate focus on whether the Governor’s proposed diversion is a good idea, not the fact that he has proposed it.

First, Governor Branstad challenged the bounds of basic math — miscounting jobs — and now it’s language arts.

The Governor reportedly got a little testy last week at a Des Moines Register editorial board meeting. Among his complaints: references to a “diversion” of revenue from a state sales tax for school infrastructure to support water-quality improvements. From the Register:

Branstad, in particular, took issue with the idea that his proposal diverts money away from schools.

“I can’t see how you can possibly call it a diversion when schools are going to get at least $10 million more guaranteed every year, plus a 20-year extension,” he said. “They’re sharing a small portion of the growth.”

Well, here’s how you call it a diversion:

diversion
[dih-vur-zhuh n, -shuh n, dahy-]
noun
1. the act of diverting or turning aside, as from a course or purpose: a diversion of industry into the war effort.
dictionary.com

Under the Governor’s plan, there is a “diverting or turning aside” a share of sales-tax revenues from their currently authorized “course or purpose,” school infrastructure, from FY2017 beginning July 1 this year, to FY2029. This is illustrated by Governor’s own handout on the plan. See the one-page document his office provided the media on Jan. 5.  The graph at the bottom of that page (reproduced below), shows the diversion shaded in blue, beginning with the black vertical line and running to the red dotted line.

160105-water-school-graph
Of course it’s a diversion. In fact, the diversion continues if the tax — which would not exist before or after FY2029 without voters’ intent for its use in funding school infrastructure — is extended to FY2049.

May future debate focus on whether the Governor’s proposed diversion is a good idea, not the fact that he has proposed it.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 

 

Big state, big issues — an obligation for all

We all have an obligation to clean up our rivers lakes and streams and no sector can be exempt. It is not a voluntary matter.

160104-osterberg-map-7x7I put up a new map at the IPP office this morning. It’s a big one — about 4 feet by 6 feet, and it’s impressive on a wall.

What makes it more impressive comes when you think of what that map represents, some 36 million acres of land, and to think of how those acres are used, and what we are doing to protect them.

Even though it’s mainly a road map, we see those roads plotted on a landscape that we know is mostly farmland — rivers, lakes and streams running through it, and dominated by it.

Each five years the United States Department of Agriculture puts out a census of agriculture. The last one from 2012 shows just how agriculture dominates our land. About 24 of the 36 million acres are in cropland nearly all corn and soybeans — though even more land is agricultural since activities like grazing push the total of ag land well beyond 30 million acres. Cropland, woodland and pasture make up so much of the landscape that the category house lots, ponds, roads, wasteland, etc. makes up only 1.4 million acres, or less than 5 percent of the total.

IPP pointed out in a 2010 report Solution to Pollution: It Starts on the Farm that so little land in Iowa is devoted to urban uses (lawns or golf courses) that even if urban application rates of Nitrogen and Phosphorous fertilizer were much higher than that on farms, only 2 percent of the pollution from land application of fertilizer comes from lawns and golf courses.

When sewage treatment plants are included in the urban share of nutrient pollution, agriculture still dominates.

So the take-away message — water pollution in Iowa comes from agricultural land. We all have an obligation to clean up our rivers, lakes and streams and no sector can be exempt — particularly the biggest one. It is not a voluntary matter.

IPP-osterberg-75Posted by David Osterberg, co-founder of the Iowa Policy Project

ALEC Gets it Backwards in Rich States, Poor States

ALEC’s report is a recipe for economic inequality and declining incomes for most citizens and for depriving state and local governments of needed revenue for infrastructure and education — the underpinnings of long-term economic growth.

We hear a lot about business climates from people who are looking for ways to cut taxes. But they usually get it wrong. One example is the Rich States, Poor States analysis produced by the American Legislative Exchange Council, or ALEC, an organization frequently considered a “bill mill” for corporate-friendly legislation.

The centerpiece of Rich States, Poor States is the “Economic Outlook Ranking,” which ranks states on their conformance to ALEC’s preferred policies, with the best state ranked number one. But when we can compare states ranked the best by ALEC with states ranked the worst, it turns out that ALEC’s 20 “best” states have lower per capita income, lower median family income, and a lower median annual wage than the 20 “worst” states. ALEC’s “best” states also have higher poverty rates: 15.3 percent on average from 2007 through 2013, versus 13.7 percent in the “worst” states. The states favored by ALEC include the likes of Utah, South Dakota, and Idaho, whereas ALEC’s “worst” states include New York, California, and Vermont.

Basic RGB*Best and worst states according to the average Economic Outlook Ranking in Rich States, Poor States, 2007-2015. Income measures are an average over the period 2007 to 2014 (2013 for Median Income).

Looking at it another way, the 20 states that performed best on the four measures of income (the actual rich states) actually score much worse on ALEC’s ranking than the 20 states with the lowest income (the actual poor states).

151130-ALEC-poor-rich

*Average ALEC ranking of the 20 states that performed best on four measures of income — per capita income, median family income, median annual wage, and poverty rate — vs. average ALEC ranking of the 20 poorest states. An ALEC ranking of 1 is best. ALEC ranking is the average of the state’s rank in the first through eighth editions of the Economic Outlook Ranking; rich and poor states are defined on the basis of their average ranking on the four income variables from 2007 through 2013 or 2014.

While Rich States, Poor States purports to provide a recipe for economic growth and “policies that lead to prosperity,” it actually advocates measures to lower wages and reduce opportunity for most Americans. To attain the highest EOR would require a state to have no individual or corporate income tax, no estate or inheritance tax, no state minimum wage, severe tax and expenditure limits, limited public services, and weak labor unions. The evidence and arguments cited to support these policies range from deeply flawed to nonexistent.

We conclude that the actual purpose of Rich States, Poor States is to sell the ALEC-Laffer package of policies — fiscal austerity, taxing lower income people more than the wealthy and wage suppression — in the sheep’s clothing of economic growth. In actuality, the book provides a recipe for economic inequality and declining incomes for most citizens and for depriving state and local governments of the revenue needed to maintain public infrastructure and education systems that are the underpinnings of long- term economic growth.

2010-PFw5464Posted by Peter Fisher, Research Director of the nonpartisan Iowa Policy Project

REAP: Long on Promise, Short on Support

REAP is kept well short of the $20 million annual support that had been envisioned — a nearly 25-year trend that keeps REAP well short of its potential.

When Iowa’s Resource Enhancement and Protection program (REAP) was established in 1989, the Legislature set its spending authority at $30 million, but funded it at only half that — $15 million. The next year, funding (FY1991) was set at $20 million, an amount we thought was sustainable.

It never again reached that level — though lawmakers attempted to set it at $25 million for the 25th anniversary of the program in the just-completed fiscal year. Governor Branstad vetoed $9 million that year, leaving REAP at $16 million for FY2015, where it stands for FY2016 as well.

Ironically, the 2014 veto came as the state was promoting its voluntary Nutrient Reduction Strategy. Twenty percent of REAP goes to these programs. The veto reduced funds available to help farmers implement new nutrient runoff reduction and filtration measures that could contribute to the goals of the nutrient strategy. Actions like these contributed to a long-term REAP shortfall of more than $220 million.

Basic RGB

Basic RGB

See our new Iowa Policy Project report, REAP: A Case Study of Stewardship. With a more clear understanding of how REAP can make a difference in our quality of life, all Iowans may evaluate how it should be funded. In practice, REAP is kept well short of the $20 million annual support that had been envisioned — a nearly 25-year trend that keeps REAP well short of its potential.

IPP-osterberg-75Posted by David Osterberg, IPP co-founder and environmental researcher

On big issues, Iowa leaders emerging locally

In the absence of state-level leadership, it’s inevitable, perhaps, that local officials will find a way to help their constituents.

If state leaders won’t lead, local leaders in Iowa are showing they will take up the job.

On three big issues in the last several months, we have seen this:

I don’t know about you, but I’m beginning to see a trend.

Public policy matters in Iowans’ lives, in critical ways. We elect people who can take care of it in a way that works for all Iowans, but not enough who will. In the absence of state-level leadership, it’s inevitable, perhaps, that local officials who also are hired to work for their constituents will find a way to help them.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project